G.R. No. L-19867. May 29, 1968
GOVERNMENT SERVICE INSURANCE SYSTEM, PLAINTIFF-APPELLEE, VS. CALSONS, INC., CESARIO P. CALANOS, AND NENITA GODINEZ, DEFENDANTS-APPELLANTS.
MAKALINTAL, J.:
Appeal from the decision of the Court of First Instance of
Manila.
On April 11, 1957 appellant CALSONS, INC. applied for a loan of
P2,000,000.00 to appellee to pay the balance of the
purchase price of certain parcels of land situated at the corner of Globo de Oro and Elizondo Streets, Quiapo, Manila,
and to finance the construction of a two-storey
textile market building on said land.
The application was approved by appellee’s
Board of Trustees on August 26, 1957. In connection with said loan appellants executed
on October 31, 1957 a promissory note binding themselves jointly and severally
to pay appellee the sum of P2,000,000.00,
with interest at the rate of 7% per annum compounded monthly, in 120 equal
monthly installments of P23,221.69 each.
Under said note “the first installment shall be due and payable
beginning the month following the last release and/or the month following the
expiration of the period for the construction of the textile market building,
whichever is earlier, and the rest on the 7th day of every month thereafter
until the principal of TWO MILLION PESOS (P2,000,000.00)
and the interest shall have been fully paid.” To secure payment of the
note “and/or the interest thereon and/or other obligations arising thereunder“, appellants executed on the same date a
first mortgage in favor of appellee on five (5)
parcels of land particularly described in the mortgage contract, “together
with all the buildings and improvements now existing thereon or which may hereafter be constructed on the
mortgaged property (ies) of which MORTGAGOR is the
absolute owner, free from all liens and encumbrances.” The aforementioned
five (5) parcels of land were among the properties acquired by appellant
CALSONS, INC., from Tuason & Sampedro,
Inc., for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND
PESOS (P1,100,000.00) under a Deed of Assignment dated October 29, 1957.
The conditions of the mortgage contract which are relevant to
this case are the following:
“2. The MORTGAGOR shall not sell, dispose of, mortgage, nor in
any manner encumber the mortgaged property (ies)
without the prior written consent of the MORTGAGEE.
“4. If the MORTGAGOR shall, at any time, fail or refuse to pay
any of the amortizations on the indebtedness, or the interest when due, or
whatever other obligation herein agreed, then all the amortizations and other
obligations of the MORTGAGOR of any nature, shall become due, payable and
defaulted and the MORTGAGEE may immediately foreclose this mortgage judicially
or extrajudicially under Act 3135, as amended and/or
under C.A. 186, as amended, and/or Act No. 1508, as amended. x x x.”
“14. This mortgage shall furthermore
be subject to the following ADDITIONAL CONDITIONS:
1) That the
applicant shall pay to the system P23,221.70 monthly, including principal and interest.
2) That the first
release of P819,000.00
on this loan shall be made only after:
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xxx
b. The submission of
evidence showing payment on realty taxes up to and including that of the
current year;
c. The submission of
evidence showing the reduction of applicant’s account on the lot to at least
P819,000.00;
d. The submission of the
certificates of title in the name of the applicant to the property offered as
collateral for this loan; provided, that if the said certificates of title
could not be secured without paying the balance of the purchase price, said
balance shall be paid first from the first release of this loan;
3) That the check covering the obligation
of applicant on the lots offered as collateral shall be drawn in favor of the
vendor of said lots;
4) That subsequent releases on this loan
shall be controlled in such manner that the amount to be released shall depend
on the progress of the work done on the proposed building but in no case shall
the amount to be released and the amounts already released exceed 60% of the
appraised value of the lots and the existing improvements thereon as of every
release;
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6) That the proposed building shall be completed
within twelve (12) months from the date the first release on this loan is
made;”
The first release in the amount of P819,000.00
was made on November 7, 1957, while the second (and last) release in the amount
of P30,000.00 was made on May 15, 1958.
The checks covering both releases were drawn in favor of the vendor of
the mortgaged properties.
In accordance with the agreement between the parties, the old
building standing on the mortgaged properties was insured for P300,000.00 on December 1, 1959.
Appellee advanced the sum of P5,628.00 for the annual
premium, but appellants failed to reimburse the same.
Appellee filed a complaint for the foreclosure of the
mortgage with the Court of First Instance of Manila on August 11, 1958,
alleging a number of violations
of the mortgage contract, to wit: (1) that the mortgaged properties had not
been freed by the mortgagor from certain liens and encumbrances other than the
mortgage itself; (2) that without the prior written consent of plaintiff
defendants removed and disposed of the complete band sawmill and filing
machine which formed part of the
properties mortgaged; (3) that defendant Calsons,
Inc., failed to submit to appellee evidence showing
the reduction of defendant’s account on the lot to at least P819,000.00;
(4) and that Calsons,
Inc. failed to begin, much less complete, the construction of the supermarket
building on the mortgaged properties. On
August 11, 1959, plaintiff filed supplemental complaint, which was admitted
without opposition. Two additional
grounds for the foreclosure of the mortgage were alleged, namely: (1) that
defendants failed, despite demands therefor, to pay
the amortizations due and payable, including accrued interest and surcharges,
on the portion of the loan released to them; and (2) that defendants failed to
complete the construction of the textile market building on the mortgaged
properties within 12 months from November 7, 1957, the date of the first
release of P819,000.00.
Judgment was rendered on March 3, 1962 in favor of plaintiff, and
defendants brought this appeal directly to this Court in view of the amount
involved.
In their brief, appellants make the following assignment of errors:
1.
The Trial Court erred in holding
that it is not true that defendants have not defaulted in any of their
obligations under the mortgage contract.
2.
The Trial Court erred in ruling
that with respect to the liens and encumbrances, the defendants’ failure to pay
the balance of the purchase price of the mortgaged properties from their
original owners subjected the said properties to a vendor’s lien.
3.
The Trial Court erred in holding
that the machineries on the mortgaged properties are part of the mortgage and
that the removal and subsequent disposal of the same therefrom
by the defendants violated the said mortgage contract.
4.
The Trial Court erred in holding
that defendant Calsons, Inc. has failed to reduce its
account on the loan to at least P819,000.00 and that
such failure is a clear violation of a contract of mortgage.
5.
The Trial Court erred in holding
that the defendants failed despite demand therefor,
to pay the amortization due and payable, including interests and surcharges on
the portion of the loan released to them.
6.
The Trial Court erred in rendering
judgment for plaintiff and against the defendants ordering the latter to pay
jointly and severally the plaintiff of the sum of (1) P819,000.00 with
interests at the rate of 7% per annum compounded monthly from November 8, 1957
until the same is fully paid: (2) P30,000.00 with interests at the rate of 7%
per annum compounded monthly, from May 16, 1958 until the same is fully paid:
(3) P5,628.00 yearly insurance premium with interests of 7% per annum
compounded monthly, from December 1959 until the same is fully paid; (4) the
sum equivalent to 10% of the foregoing sums as expenses of collection and
attorney’s fees, plus the costs of this action.
7.
The Trial Court erred in failing
and/or neglecting to act and pass upon the counterclaim of the
defendants-appellants notwithstanding the fact that said counterclaim is fully
established by the evidence on records.
The second and fourth
errors assigned are interrelated and will first be taken up. The two certificates of title covering the
mortgaged properties do not show any lien or encumbrance thereon other than the
mortgage itself. This is admitted by
both parties. Appellee
refers, however, to the vendor’s lien in favor of the former owners,
representing the unpaid balance of P280,000.00 on the
purchase price of the lots mortgaged.
The lien, appellee points out, is a legal
encumbrance and therefore effective although not recorded. On the other hand, appellants contend that appellee is estopped from
invoking its right to have the mortgaged properties free from the vendor’s
lien on two grounds, namely: (1) that appellant had previous knowledge of said
lien as evidenced by the two releases of P819,000 and P30,000 directly to the
vendor of the mortgaged properties, and (2) that appellant committed itself to
pay to the said vendor the amount of P280,000.00, balance on the purchase
price, within a period of six (6) months from October 28, 1957.
The contention cannot be
sustained on the first ground. One of
the reasons why appellant Calsons, Inc., applied for
the P2,000,000.00 loan was precisely to use part thereof to pay the balance of
the purchase price of five (5) parcels of land it mortgaged to appellee. And to
assure itself that no vendor’s lien attached to the
said properties appellee caused the following
conditions to be added to the original terms of the mortgage contract:
2) That the first
release of P819,000.00 on this loan shall be made only
after:
e. The submission of evidence showing the
reduction of applicant’s account on the lot to at least P819,000.00;
d. The submission of the certificates of title in
the name of the applicant to the property offered as collateral for this loan;
provided, that if the said certificates of title could not be secured without
paying the balance of the purchase price said balance shall be paid first from
the first release of this loan;
3) That the check
covering the obligation of applicant on the lots offered as collateral shall be
drawn in favor of the vendor of said lots;
Pursuant to the foregoing conditions the check covering the first
release of P819,000.00 was drawn in favor of the
vendor of the properties, and the release was made upon submission of the two
transfer certificates of title already in the name of appellant Calsons, Inc., as vendee, without any annotation thereon of
any lien or encumbrance except the mortgage itself in favor of appellee. It turned
out, however, that appellants had failed to reduce their account on the lot to
P819,000.00, as stipulated in the mortgage contract,
since there was still a balance of P280,000 on the purchase price. With respect to the second release of P30,000.00, the check was also drawn in favor of the vendor
with the understanding that it would be used to pay the real estate taxes due
on said properties and thus remove the corresponding tax lien imposed by law.
The steps taken by appellee negate any inference that it agreed to waive its
right to have the properties “free from all liens and encumbrances,”
as provided in the mortgage contract.
Estoppel is invoked by appellants on
the basis of a letter dated October
28, 1957, sent by the Manager of appellee’s
Real Estate Department to the vendor of the properties, to the effect that the
balance of the purchase price in the amount of P280,000.00
would be released within six (6) months from the date of the said letter. The commitment of said Manager was not
recognized by the Board of Trustees of the appellee
as shown by the fact that it was not incorporated in the mortgage contract,
which was executed on a later date – October
31, 1957. While the schedule
of subsequent releases was clearly defined in the mortgage contract, no
mention was made about the said commitment.
Thus, Paragraph 14 (4) of the mortgage contract states:
“(4).
That subsequent releases on this loan shall be controlled in such
manner that the amount to be released shall depend in the progress of the work
done on the proposed building but in no case shall the amount to be released
and the amounts already released exceed 60%, of the appraised value of the lots
and the existing improvements thereon as of every release;
Regarding the third error assigned, appellants do not deny the
fact that they removed and disposed of the machineries installed in the
building which were standing on the mortgaged properties. However, they contend that the said
machineries were not included in the mortgage.
The contention is groundless.
The mortgage was on the lands “together with all the
buildings and improvements now existing or which may hereafter be
constructed” thereon. And the machineries,
as found by the trial court, were permanently attached to the property, and
installed there by the former owner to meet the needs of certain works or
industry therein. They were therefore
part of the immovable pursuant to Article 415 of the Civil Code, and need not
be the subject of a separate chattel mortgage in order to be deemed duly
encumbered in favor of appellee.
Under the fifth assignment of error, appellants point out that
there is no time specified in the mortgage contract within which the
amortizations on the loan should begin to be paid, and conclude that they
should begin only from the time the proposed building started earning
rentals. The provision of Paragraph 14
(13) of the mortgage contract is invoked, to wit:
“That rentals from the proposed building equivalent to the
monthly amortization on this loan shall be assigned in favor of and made
payable to the System.”
As a corollary argument, appellants add that since the present
action was instituted three (3) months before the expiration of the
twelve-month period (from November 7,
1957) within which the construction of the supermarket building
should be completed the premature institution of the suit rendered the
construction of said building impossible, and hence no default in payment was
incurred.
Again this contention of appellants is without merit. The promissory note executed by them clearly
provides when the first installment, as well as subsequent ones, would become
due, thus:
“The first installment shall be due and payable beginning the
month following the last release and/or the month following the expiration
of the period for the construction of the textile market building, whichever is
earlier, and the rest on the 7th day of every month thereafter until the
principal of TWO MILLION PESOS (P2,000,000.00) and the
interest shall have been fully paid.”
As previously mentioned, the mortgage
contract provides that the proposed building should be completed within twelve
(12) months from the date of the first release.
Said release having been made on November 7, 1957, the construction
period of 12 months expired on November 7, 1958; hence, the first installment
became due one month thereafter or on December 7, 1958, and the rest on the 7th
day of every month thereafter.
Appellants’ failure to pay the amortizations, interest and surcharges
demanded of them by appellee, therefore, constitutes
a violation of the mortgage contract and is sufficient ground for the
foreclosure of the mortgage.
IN VIEW OF THE FOREGOING, the sixth and seventh
assignments of error are without merit.
The judgment appealed from is hereby affirmed, with costs against
appellants.
Concepcion, C.J., Reyes, J.B.L., Dizon, Zaldivar, Sanchez, Castro,
and Angeles, JJ.,
concur.